09.29.2011
By Terry Flanagan

Stocking Up on Software

Buy-side firms look to outsource key business functions.

Hedge funds and asset management firms in general are stocking up on software talent to tackle a myriad of tasks unsuitable for off-the-shelf products.

More often than not, they are looking to source that talent from outside, or even abroad.

Data Art, a software outsourcing provider serving hedge funds and investment mangers, has experienced robust growth as buy-side firms seek to reach the next level ion new apps, ranging from advanced portfolio risk management to scenario modeling, and order management.

“We are a custom software development shop in investment management,” Alexei Miller, executive vice president at Data Art, told Markets Media.

“Our specialty is in making customized software a viable alternative to costly off-the-shelf products or in-house development.”

Most of the company’s work is concentrated in middle- and back-office functions such as reference data, portfolio management, and investor reporting. “The front-office tends to be well-productized,” said Miller. “The middle and back offices is where packaged products are not up to par.”

A typical use case is an asset management firm that requires system development in order to enter a new line of business.

“A multistrategy investment firm decides to open a new trading desk in mortgage-backed securities or credit derivatives, for example, and they need to develop or deploy a portfolio management system for that trading desk and integrate it their enterprise reporting and accounting systems,” said Miller.  “We will provide custom development of the system and then integrate it with downstream and upstream systems.”

A major component of the company’s value proposition is its deployment of offshore software development resources, including R&D centers in St. Petersburg and Voronezh (Russia), Kharkov and Kerson (Ukraine), as well as offices in New York, Chapel Hill, N.C., and London.

“We have figured out how to empower offshore resources with industry knowledge,” said Miller.

This is accomplished through an agile software development process in which developers sit side-by-side with the traders for whom they are building the system, acting as the business unit’s own internal IT team.

The process enables rapid deployment as well as frequent upgrades to keep abreast of new technology or business needs.

“We aim to get a system into production in three to six months,” said Miller. “After that, it’s an ongoing agile maintenance process where improvements are made every few weeks.”

The company limits its contractual commitments to six-month intervals, this ensuring that it is always fulfilling customer expectations.

“We have to re-win our business every six months,” said Miller. “That keeps us motivated and the customer is assured of not becoming dependent on a single vendor.”

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